To help ease the financial strain, the Dubai government this week launched a $20 billion long-term bond program. The Central Bank of the United Arab Emirates bought the first issuance, amounting to $10 billion, according to an official Dubai statement.

This infusion will provide the Dubai government with the necessary cash flow to make up for money that has dried up globally in the last 12 months, the statement said, and accordingly “meet all upcoming financial obligations and continue its development program.”

This underscores the depth of the economic problems facing Dubai, which relies on real estate investment for its financial well-being, unlike some of its Arab neighbors, which are oil-rich.

The opening of Giorgio Armani’s first hotel has been pushed back to 2010 from the slated date of next September, according to sources, although the residence portion of the project is still scheduled to open this fall. Palazzo Versace will also open early next year, not in 2009, as confirmed by a spokeswoman.

Armani’s project in Dubai is through an agreement with real estate giant Emaar Properties, whose sales and property prices have been impacted by the industry’s slowdown. In 2008, Emaar recorded a 15 percent drop in net operating profits to 5.57 billion United Arab Emirates dirhams, or $1.52 billion at average exchange, on a 10 percent drop in annual sales to 16 billion dirhams, or $4.35 billion, compared with 2007.

“Emaar is concentrating on completing all the projects that have commenced construction and has put new projects and launches on hold to [help] reduce the real estate property supply in Dubai,” Emaar said as it posted its financial results this month.

Chairman Mohamed Alabbar said, “Our primary focus in the last quarter of the year was to mitigate the negative impact of the global financial crisis by facing up to the new economic realities and identifying innovative strategies to sustain businesses.”

Alabbar said the group is progressing with the construction of the Burj Dubai tower, which, it maintains, will open this year. Completion of the building, which will house the Armani hotel and residences, was projected by late 2008. The spire was erected in December. According to sources, Emaar plans to complete the nearly 2,700-foot tower by Sept. 9, 2009, the date of the inauguration of the city’s subway, but it is likely to be “a soft opening.” A gargantuan web of water piping, sewerage lines, access and exit planning is being developed, as well as a 900-foot-long fountain near the tower, with 50-story-high water sprays, 6,600 lights for over 1,000 different water expressions performing to music and 22,000 gallons of water.

Sources say that the 144 Armani apartments are ready, but that the 432,000-square-foot hotel designed by Armani and decorated with his Casa line is far from completion. However, John Hooks, deputy managing director and group commercial director, said the apartments are on track to open in the fall as planned.

Palazzo Versace Hotel and Condominiums resort will include 215 suites, a day spa and restaurants, and will be located within an area that will include a museum of contemporary art, a port and walkway, and a zone designated for cultural performances.

The resort will cover 1.4 million square feet and be furnished with Versace’s home collection. The hotel, developed with Emirates Sunland Group, will feature a neoclassical facade resembling Versace’s historic Via Gesù headquarters in Milan. There will also be 188 condo residences as part of the luxe resort. A Versace spokeswoman said the company is “confirming its expansion plans in Dubai as previously scheduled.” The Maison will open a flagship and a fine watch and jewelry boutique this spring at the Dubai Mall, which is owned by Emaar.

Meanwhile, the Gianfranco Ferré Stresa tower project is also “ongoing,” said a spokeswoman, despite the financial troubles of its parent company, IT Holding. However, the tower, built and managed by GIO Developments, is being erected “in alignment with a new, more controlled period of growth” for the city, and construction will begin in the second half of 2009. The company conceded that the launch has been delayed “due to commercial considerations, as the effects of the global situation continue to echo in Dubai.”

The 60-plus-story tower of luxury apartments, which will be built in Business Bay, within the central business district of the city, was initially slated for completion in 2011. Business Bay surrounds and is adjacent to downtown Dubai, the area being developed by Emaar, which includes the Burj Dubai. The spokeswoman said that “the site has been cleared and prepared for work to commence” on the building, named Gianfranco Ferré Stresa, after the town where the late designer had his summer residence.

“Soil investigations are already completed, and the project design has been submitted to the local authorities for preliminary approval,” said the spokeswoman. Also, a number of changes to the structural design of the project are taking shape. The changes, said the spokeswoman, were made “to enhance the residents’ experience and adhere to various green building directives recently released by the Dubai government.”

A Roberto Cavalli Club, in collaboration with local Pragma Group, was scheduled to open last November but is now poised to open in April. The designer, however, denied the delay had to do with local issues, but rather attributed it to the scale of the Club. “It’s huge, very rich and special. We’re having chairs made in Lebanon, for example, and fabrics flown in from Italy,” said Cavalli.

Salvatore Ferragamo-designed penthouses in collaboration with Trident International Holdings, at the Pentominium Tower in Burj Dubai, are set to open in 2012. For this reason, the company’s chief executive, Michele Norsa, said it was too early to gauge progress. “They are still digging,” he said.

Ferragamo will open four stores in the area in the first half of this year. One in the Dubai Mall, its biggest in the region at 4,320 square feet, will open in March or April. The others are set to be unveiled in Jeddah, Riyadh; Manama, Bahrain, and Abu Dhabi, UAE. Norsa conceded that there is a slowdown in Dubai, which relies more on real estate and financing for its cash stream, compared with Abu Dhabi, which depends on oil, and Doha, Qatar, rich in gas.

Vittorio Missoni, who oversees institutional affairs at the family-owned company, concurred Abu Dhabi and Doha are “more connected to rich Arab clientele and less dependent on real estate than Dubai, which is more global.”

Real estate development especially targeted Russians and wealthy customers from the Middle East, who view Dubai as Europeans see Monaco or Americans look at Las Vegas, said Missoni. “The flow of Russian tourists to Dubai has ebbed over the past few months, significantly impacting business in the area,” he added, noting that his company also opened a boutique at the Dubai Mall.

Still, since 2006, according to the Dubai Department of Tourism and Commerce Marketing and Natalie Tours, the biggest tour operator in Russia, there was an increase in overall Russian tourism. More than 473,000 Russians stayed in Dubai hotels in 2007, up 12 percent from the previous year. In the first half of 2008, the number of Russian hotel guests amounted to 373,908 against 240,435 guests in the same period in the previous year, representing 13.5 percent growth. Statistics for the full year of 2008 were not available at press time.

As Rami Tawfiq, research manager of consultancy services at real estate consultant Colliers International, explained, “Market conditions have changed, impacted by reduced investor appetite, and at the base of it all is a liquidity problem. [Given these financing issues], a number of projects have been delayed, while others may be canceled.”

Tawfiq said it is estimated that the real estate construction sector accounts for 30 percent of Dubai’s GDP, and the impact on this sector has resulted “in corporate downsizing and cost cutting.”

This has had a concurrent impact on demand for housing as more supply has entered the market over the past two years to accommodate an influx in foreign workers. However, visa regulations in the UAE stipulate that expats who have lost their jobs are unable to stay in the country, unless they find alternative employment.

As per Colliers, annual residential rents in Dubai average at $1,100 a square meter, or about $100 a square foot. “While there has not been a significant drop in these rates as of yet, landlords have had to adopt more competitive lease terms in order to entice new tenants. Whereas the market was characterized by annual rental payments in advance as demand exceeded supply, we are now seeing quarterly checks become the norm,” said Tawfiq.

According to an HSBC study issued last month, residential sales prices dropped 23 percent since last September, after a 61 percent growth over the first three quarters of 2008. “While not definitely pointing toward distress, we note a higher level of bulk buying activity, with multiple floors being purchased at fixed prices,” HSBC reported. “Our analysis of transaction data suggests that there remains a disconnect between advertised and agreed prices. At the peak, agreed prices were around 20 percent off asking prices. Now the discount appears to have deepened.”

Giuseppe Menniti, international marketing and sales director at Italian men’s wear brand Harmont & Blaine, downplayed Dubai’s struggles, attributing them to more general, global economic woes. “Dubai is more exposed [than Doha or Abu Dhabi] because of its real estate and financial projects,” said Menniti. “However, they are able to create projects that we can’t even fathom, there is leadership and vision, projected into the future.”

Harmont & Blaine opened a boutique this month at The Pearl, Qatar’s new residential and commercial development, and already counts a store in Dubai’s Wafi Mall. It will open in-store shops and corners at Dubai’s Galeries Lafayette and Saks Fifth Avenue in March.

A boutique and a flagship will also open in Dubai in June and August at Marina Mall and Dubai Mall, respectively. Menniti said he expects the Middle East to generate sales of 15 million euros, or $18.9 million at current exchange rate, by 2010.